How to secure yourself a knock-out investment deal
Investment options – how are you meant to choose?
It’s a bit like betting on the ‘big fight’. Who’s going to win? Who will withstand the rounds of punches and be standing at the end, giving you a return on investment?
And it’s not always the favourite who wins!
With so many options out there, (and so much information to boot), it isn’t always easy to know what investment to choose. It’s your hard-earned money, and you want to make sure it’s going to work for you so that you can retire a little more comfortably.
Let’s have a look at the top 4 investment options so you can pick your winner
- PROPERTY
Barriers of entry: Be prepared to encounter some high costs such as stamp duty (which is about 5% of your purchase price) and conveyancing or legal fees (anywhere from $990 to $1500).
The high costs will need you to have enough cash flow and a stable job.
Management: Property investment can be professionally managed by a real estate agent, or you can do it yourself. It’s usually easier to use an agent as they do it all for you – advertising, open houses, background checks for rentals etc. They also manage the property for you (usually for a fee of around 5.0% to 7.5%), answering tenant questions or complaints, and organising repairs or maintenance as needed.
Cost: You’re going to have large upfront costs if you decide to invest in property. You’ll also face ongoing management costs along with interest costs from the home loan.
- SHARES
Barriers of entry: To invest in shares, you are required to set up an online broking account (which isn’t too hard) which can take up to a week. You’ll also need a separate bank account, also known as a trading account. Alternatively, you may wish to find a stockbroker to set everything up and trade on your behalf.
Management: Once you’ve purchased shares, there’s not much left to do. Most people have a long-term strategy when it comes to share investment, so they sit back and let the shares do the work for them. You should keep an eye on the company you have invested in though. If the company is successful, your shares will flourish. However, if the company takes a downturn, your shares will suffer. It’s the risk you take.
Cost: You’ll usually find a fixed trade fee (from as little as $20 per trade) when using an online trading platform. Brokers will usually charge a percentage of the trade, and many will have a minimum cost (which may be a few hundred dollars).
- MANAGED FUNDS
Barriers of entry: A managed fund will require a minimum deposit, usually anywhere from $2,000 upwards. It’s best to ask a financial adviser to help you set this up and manage the underlying investments. In a highly regulated industry with a bit of paperwork to do, a small investment in a financial adviser is well worth it for a managed fund.
Management: A fund manager is highly recommended. They will research the market and buy and sell shares in your portfolio to help you achieve a return (hopefully above the index). A managed fund allows you to invest in multiple asset classes such as property trusts and international shares so that you can have a diverse portfolio.
Cost: Set up costs can vary from $500 to $1000 depending on the adviser, and you should expect ongoing costs for advice (which is either a percentage or flat fee). Management costs (charged by a fund manager) can vary from as little as 0.3% to 2% pa depending on your investments. International shares or boutique investments will usually cost more than Australian shares.
- CRYPTO
Barriers of entry: Crypto trading can take a few weeks to set up and honestly, it can be quite confusing. You’ll need several trading accounts to buy or trade the crypto you want. There are lots of accounts available (many from overseas) that all charge different fees and offer different crypto to trade. On the plus side, you do need a 2 step verification which is designed for your protection.
Management: Investing in Crypto is like investing in direct equities or shares. Again, it pays to have someone on your team who knows how this system works. Be wary of schemes that offer you a 1% return per day in Crypto, claiming to be ‘professional managers’, as they are usually a phoney set up.
Cost: With Crypto, you’re usually charged around 1.0% to 3.0%. Be careful as it’s not always charged in Australian dollars as it can be charged in Crypto (convert it back to work out your actual costs). Some platforms will charge you to put money into them and then charge you again to buy or sell. Please do your research and be careful with this investment.
Historically, what are the best performing investments?
Before you seek financial advice, we’re sure you’re going to do a little bit of research for yourself. One of the best tools available is the Asset Class Tool from Vanguard. It’s an online calculator which shows you how different investments have performed in the past, right back to 1970.
You can see the performance of Australian shares, property, bonds and cash as investments. It’s worth a look!
Want advice on your financial investment options?
If you are curious to find out what investment options would suit you and your situation, please get in touch with us. We’ll work with you to create an investment strategy that will not only work for your current situation, but that will grow with you for a secure future.
Email me at: aaron@ekfinancialgroup.com.au
Or call us on 03 9020 1888.
